Time and time again, research has proven that the more heterogeneous a top management team is, the more effective it would be in providing strategic leadership. The heterogeneity in top management teams promotes debate, which often leads to better strategic decisions. In turn, better strategic decisions produce higher firm performance. For example, heterogeneous top management teams in the airline industry are found to have the propensity to take stronger competitive actions and reactions than do more homogeneous teams.
Conversely, when too much power resides with an individual, usually the CEO, the team’s effectiveness drops. An example could be DaimlerChrysler’s ex-CEO Jergen Schrempp who held dual positions of chairman of the board and CEO. Insiders suggested that he was purging individuals who were outspoken and who represented threats to his dominance. In fact when Jergen Schrempp resigned, the company’s stock price jumped by 10 percent to more than 40 euros, pushing the market capitalisation of the world’s fourth largest car maker—behind General Motors, Toyota and Ford—from 36 to 40 billion euros. Rarely has the departure of a CEO caused such a surge in the company’s share price.
One of the best leadership examples in leading heterogeneous teams is none other than Abraham Lincoln. In the book Team of Rivals (2005), Doris Kearns Goodwin the author illustrated how the American President created a team composed of his most able rivals, people who were unafraid to take issue with him and were confident of their own leadership abilities. He brought the disgruntled opponents together to create the most unusual cabinet in history. For example, Lincoln brought Salmon Chase into his cabinet as treasury secretary and kept him there for three years, knowing full well that Chase craved the presidency with every fiber of his being and knowing that Chase was undermining him all the time with cabinet members, Congress, and the rest of the country. But Lincoln kept him there so long as he was doing a good job at his post, that was more important than personal feelings.
In the interview with HBR senior editor Diane Coutu, Doris Kearns Goodin said:
I can’t emphasize strongly enough the fact that you’ve got to surround yourself with people who can argue with you and question your assumptions. It particularly helps if you can bring in people whose temperaments differ from your own.
When Lincoln brought Edwin Stanton into the cabinet in 1862 as secretary of war, for example, Stanton was much tougher, much more secretive, than Lincoln, who was often too kind to subordinates and at times too open. Their opposite temperaments balanced each other out. Where Lincoln was too lenient, issuing pardons for soldiers who had run away from battle to the point of hurting military discipline, Stanton was relentless in his desire to punish cowardice. By working together, pardons were issued, but not in the numbers they had been under Lincoln alone.
It takes tremendous confidence, yet humility to build a team of rivals, of leaders who have diverse skills and views, who may or may not like us. I think the application of this principle goes beyond top management teams. In our teams, do we have people whom we cannot stand but have a unique contribution to our team? People who have different temperaments, who do not see things the same way we see them? Then perhaps we are on the right track with our “Team of Rivals” towards a greater success that none of us would be able to achieve on our own.
- D. C. Hambrick, T.S. Cho, & M.H. Chen, 1996, The influence of top management team heterogeneity on firm’s competitive moves, Administrative Science Quarterly, 41: 659-684
- D.D. Bergh, 2001, Executive retention and acquisition outcomes: A test of opposing views on the influence of organizational tenure, Journal of Management, 27: 603-622
- Finkelstein & Hambrick, Strategic Leadership, 148.
- K. Bantel & Jackson, 1989 Top management and innovations in banking: Does the composition of the top team make a difference? Strategic Management Journal, 10: 107-124
- L. Tihanyi, C. Daily, D. Dalton, & A. Ellstrand 2000, Composition of the top management team and firm international diversification, Journal of Management, 26: 1157-1178
- M.E. Wiersema & K Bantel, 1992, Top management team demography and corporate strategic change, Academy of Management Journal, 35: 91-121
- Wally, S., & Becerra, M. 2001, Top management team characteristics and strategic changes in international diversification. Group and Organization Management, 26(2): 165-188